Dutchess Community College ACC 204 Managerial Accounting Quiz Prep Chapter 2

Transcription

1 Dutchess Community College ACC 204 Managerial Accounting Quiz Prep Chapter 2 Job Order Cost Accounting Peter Rivera January 2010 Disclaimer This Quiz Prep is provided as an outline of the key concepts from the chapter. It is not intended to be comprehensive or exhaustive. Quizzes may include material from the classroom lectures, the text or the homework assignments. ACC 204 Chapter 2 1

2 2 Types of Cost Accounting Systems Job Order Cost Costs are assigned to This Chapter Individual job, e.g., movie, fire truck Batch, e.g., wedding invitation printer Process Cost Costs are accumulated over a period of time for a continuous manufacturing process, e.g., corn flakes Predetermined Overhead Rate Estimated Annual Overhead Costs Expected Annual Operating Activity = Predetermined Overhead Rate! Be sure you are using the correct activity Direct Labor Hours Direct Labor Costs Machine Hours Other ACC 204 Chapter 2 2

3 Normal Balances Recall from ACC 104 Debit Assets edit Liabilities Equity Balance Sheet Dividends Expenses Revenues Statement of Retained Earnings P&L Normal Balances Normal Balances can be either Debit or edit. The Normal Balance is the side that increases the account balance. For example, Cash has a Debit Normal Balance: Debits increase Cash Debit Cash edit edits decrease Cash Opening Balance Ending Balance 85 ACC 204 Chapter 2 3

4 Journal Entries There are 9 journal entries required in a Job Order Cost system: 1 - Raw Materials: Accumulate (Purchase) 2 - Raw Materials: Allocate 3 - Labor: Accumulate 4 - Labor: Allocate 5 - Overhead: Accumulate 6 - Overhead: Allocate 7 - WIP Finished Goods 8 - Sale 9 - Finished Goods COGS Note that COGS is recorded at the time of sale because it is a Perpetual Inventory System Note the Accumulate/Allocate pattern for the 3 categories of cost: Materials Labor Overhead Purchase Raw Materials Raw Materials Inventory 5,000 Accounts Payable 5,000 Subsidiary Ledger: Materials Inventory Record This record tracks the Receipts and Issuances of Raw Materials by Specific Item; e.g., sparkplug # 1234 # of Units Unit Cost Total Cost The sum of the subsidiary ledgers should equal the general ledger ACC 204 Chapter 2 4

5 Labor Factory Labor 1,077 FICA Tax Payable (Social Security) 62 Medicare Tax Payable 15 Federal Tax Payable 220 State Tax payable 50 Salaries Payable 653 FICA Tax Payable (Employer) 62 Medicare Tax Payable (Employer) 15 Factory Labor is an intermediate account Overhead Manufacturing Overhead 2,000 Rent Payable 1,000 Utilities Payable 800 Prepaid Insurance 200 Manufacturing Overhead is an intermediate account ACC 204 Chapter 2 5

6 Job Cost Sheet Each Job has a unique Job Identification number. The Job Cost Sheet accumulates the Raw Material, Labor and Overhead costs for each individual job. Allocate Raw Materials to Jobs The Materials Requisition Slip documents the distribution of raw materials from the warehouse to be used on specific jobs and/or as overhead. This information must be reflected in both the and the Job Cost Sheets. ACC 204 Chapter 2 6

7 Allocate Raw Materials to Jobs Journal Entry Work In Process Inventory 2,400 Manufacturing Overhead 600 Raw Materials Inventory 3,000 Job #1 Cost Sheet + 2,000 Job #2 Cost Sheet The sum of the Job Cost Sheets should equal the Allocate Labor to Jobs Time Sheets are used to allocate Labor Costs from the Factory Labor account to specific jobs and/or as overhead. This information must be reflected in both the and the Job Cost Sheets. ACC 204 Chapter 2 7

8 Journal Entry Allocate Labor to Jobs Work In Process Inventory 700 Manufacturing Overhead 377 Factory Labor 1,077 Job #1 Cost Sheet 2, Job #2 Cost Sheet Intermediate Account The sum of the Job Cost Sheets should equal the Allocate Overhead to Jobs Use the Predetermined Overhead Rate to calculate the amount of overhead to be applied to the individual jobs. This information must be reflected in both the and the Job Cost Sheets. Assume that Overhead is applied on the basis of 120% of direct labor costs: Job #1: 120% x $600 = $720 Job #2: 120% x $100 = $120 ACC 204 Chapter 2 8

9 Allocate Overhead to Jobs Journal Entry Work In Process Inventory 840 Manufacturing Overhead 840 Job #1 Cost Sheet 2, Job #2 Cost Sheet Intermediate Account The sum of the Job Cost Sheets should equal the Completed Work In Process Assume that Job #1 is completed Journal Entry Finished Goods 3,320 Work In Process Inventory 3,320 Job #1 Cost Sheet 2, ACC 204 Chapter 2 9

10 Sale & Cost Of Goods Sold Assume that Job #1 is sold for $4,000. Note that as a Perpetual Inventory System, the COGS entry is made at the time of sale. Journal Entries Accounts Receivable 4,000 Sales Revenue 4,000 Cost Of Goods Sold 3,320 Finished Goods 3,320 Under / Over-applied Overhead Note that the Predetermined Overhead Rate is based on 2 estimates, and therefore is highly unlikely to be exact, which will result in Overhead being either under-applied or over-applied Estimated Annual Overhead Costs Expected Annual Operating Activity = Predetermined Overhead Rate ACC 204 Chapter 2 10

11 Under / Over-applied Overhead Manufacturing Overhead Actual Costs Costs Applied At the end of the year: if Actual > Applied (i.e., a net debit balance) then Under-applied if Actual < Applied (i.e., a net credit balance) then Over-applied Generally, the balances are closed out as an adjustment to COGS. ACC 204 Chapter 2 11